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Top Tip – IHT and the Reduced Rate of 36%

Top Tip – IHT and the Reduced Rate of 36%

Top Tip for Studying for Your CII ExamsThis week I thought we’d have a look at IHT, specifically where the reduced rate of 36% has applied since last April, where at least 10% of someone’s net estate is left to charity.

Here’s a question from our R03 calculation workbook showing how it works in practice:



Mr Grant died on 23rd March 2013, leaving £10,000 to his favourite charity, £180,000 to his wife and £350,000 to be split equally between his son and daughter. He had made no gifts during his lifetime.  What is the IHT liability on Mr Grant’s estate?



Answer                                                    £

Total estate                                          540,000
Nil rate band                                       -325,000
Spouse exemption                            -180,000

The balance is £35,000.

10% of £35,000 is £3,500.

As the charitable gift is £10,000 this is over the 10% so Mr Grant will be liable to 36% rather than 40%.

Take the gift of £10,000 from £35,000 and the balance of £25,000 is taxable at 36% = £9,000